How to become an introducing broker: steps and requirements

How to become an introducing broker in six steps

You can become an introducing broker in six steps. Signing a commercial agreement can take days, while any registration you need can take considerably longer.

1. Decide what kind of IB you will be and which markets you will cover.
2. Choose a regulated broker that can serve your audience.
3. Review the IB agreement before you sign.
4. Check whether you need your own registration or authorisation.
5. Market within the rules of each target country.
6. Build an audience that stays.

Step 1: what kind of IB will you be?

Start with your audience and the service you can offer. An educator with a trading community, a signal provider, a local business introducer and a content publisher all become IBs in different ways. That difference affects which brokers suit you and which rules apply. Be clear about the markets too. Futures, securities, spot forex and CFDs each sit under different regimes.

Where your clients live matters as much as what they trade. In the US, the NFA's definition covers anyone who solicits or accepts orders for futures, commodity options, retail off-exchange forex or swaps but does not accept money from customers. One of its listed exemptions is for a non-US firm with only non-US customers that sends all trades to an FCM for clearing. So even one US client can change your position. For background on the role itself, see what is an introducing broker.

Step 2: how do you choose a regulated broker?

Choose a broker whose licences, products and partner terms fit your audience. The broker you represent shapes your reputation, your income and your legal position, so check these four points before you talk terms:

• Licences: which regulators authorise the broker, and whether it may serve clients in the countries you target. Confirm this on the regulator's own public register.
• Product fit: instruments, platforms, account types and languages that match your audience.
• Partner terms: commission model, payout reliability, reporting and attribution rules. See the forex IB program guide for a full checklist.
• Conduct: how the broker handles complaints, withdrawals and marketing compliance.

The type of firm you partner with also depends on the market. In US futures, client money goes to a futures commission merchant, because an IB does not accept money or other assets from customers. In US securities, the firm that carries the accounts must generally be a FINRA member. FINRA has to approve the carrying agreement before it takes effect under Rule 4311. So the right partner differs by market.

Step 3: what should you check in the IB agreement?

Check the commission schedule and its definitions first, then look at attribution and client ownership, clawbacks, termination terms, the permitted marketing channels and countries, and who carries regulatory compliance. Read it all as if a dispute had already happened. Some agreements make you responsible for obtaining any licences you need. Take that seriously. Forex IB commission explains the commission side.

US securities rules show what a clear split of duties looks like. Under FINRA Rule 4311, a carrying agreement must state the responsibilities of each party. For fully disclosed accounts, it must give the carrying firm the job of keeping customer funds and securities safe. Customers must also be told in writing about the arrangement when their account opens. Your IB agreement may face looser rules. It should still be just as clear about who does what.

Step 4: do you need a licence or registration?

This step decides whether you can operate at all, and the answer depends on where you and your clients are. The summaries below are deliberately high level.

Do US futures IBs need CFTC registration and NFA membership?

Yes, in most cases. An IB in US futures generally must register with the CFTC and become a member of the NFA, subject to limited exemptions. The NFA handles registration. The firm's principals and associated persons must pass fitness checks and meet proficiency requirements, and each one files a Form 8-R and gets fingerprinted. The NFA charges a non-refundable $200 application fee for the firm and $85 for each principal and associated person.

A guaranteed IB works under a guarantee agreement with one futures commission merchant. An independent IB can work with several, but in return it must meet minimum adjusted net capital and financial reporting requirements. Forex adds more. IBs that introduce retail off-exchange forex business face extra NFA forex approval and proficiency requirements, and one principal of a forex IB must be a forex associated person. The NFA publishes the current requirements and fees.

What do securities introducing brokers need in the US?

In short, you need to become a full broker-dealer. You register with the SEC, join FINRA, get your representatives qualified and sign a clearing agreement with a carrying broker-dealer, which FINRA must approve before it takes effect. That is a big job. It goes far beyond a partner sign-up.

Does a UK introducing broker need FCA authorisation?

Usually, yes, or else appointed-representative status. That is because introducing clients to an investment firm is often a regulated activity in the UK, which the law calls making arrangements with a view to transactions in investments. A specific exclusion can apply, but only in some cases.

If you have no authorisation of your own, you can act as an appointed representative of an authorised firm, and that firm then takes responsibility for what you do. Financial promotion rules cover all your marketing. For CFD promotions to retail clients, COBS 22.5 also sets the risk warnings you must use.

Can an EU introducer act as a MiFID II tied agent?

Yes, if it works for a single investment firm. Under MiFID II Art 29, a person who promotes an investment firm's services and brings in clients for that one firm can be appointed as its tied agent. The firm then takes full and unconditional responsibility for the agent, which appears in a public register in the member state where it is established. National rules on marketing and on CFDs for retail clients also apply.

What about other countries?

Other countries range from formal licensing to no specific IB regime. Even without an IB licence, rules on financial advice, promotions and consumer protection can still apply. The rules of the country where your clients live usually matter as much as where you are based. Check both.

Step 5: how do you market within the rules?

Compliant marketing comes down to five habits:

• Disclose that you are paid by the broker and how.
• Use risk warnings that meet the rules in each target market, especially for CFDs and other margin products.
• Never promise returns or present past performance as a guide to future results.
• Do not accept client deposits or trade clients' accounts unless you hold the permissions to do so.
• Keep records of your promotions and of client communications.

Step 6: how do you grow once you become an introducing broker?

Sustainable IBs earn from clients who stay, so the work usually comes down to education, honest platform support and content in the client's own language. Many IBs also combine community channels with content and paid campaigns. Forex marketing covers the channels brokers and partners use, while trading competitions are one format that gives communities a reason to engage.

Once you know how to become an introducing broker in your market, the introducing brokers guide shows how IBs fit alongside affiliates, white labels and money managers.

If you run a brokerage and want to reach traders beyond IB channels, contact Memento about placement on trading comparison platforms and financial media.